New Delhi, Dec. 3: The government, which has announced its plans to establish an interim Pension Funds Regulatory Development Authority (PFRDA), has now decided to have an interim Central Record-keeping Agency (CRA) in place by January 1.

“We are thinking of an entry management for CRA by January next year. This will be an interim body, but we will make sure that this arrangement lasts for a maximum period of two to three months,” finance ministry joint secretary (capital markets) U. K. Sinha said. He was speaking at a pension summit organised by Invest India Economic Foundation here today.

In August, the Union cabinet cleared the proposal to establish an interim PFRDA and the structure is now in place. However, all instructions and payments to fund managers will be routed through CRA. The government will operationalise the interim PFRDA and come up with a new defined contribution pension scheme by January 1 for an expected one lakh employees.

The pension regulator, which will be free from government interference, will come up with investment guidelines. It will also invite bids from pension fund managers who are keen on entering the sector.

The PFRDA will decide on the foreign direct investment (FDI) limit and the minimum entry capital norms for the nascent pension sector in India.

Stating that the government has not yet decided the FDI limits for pension fund managers, Sinha said, “Before taking any final decision, the government will consult the industry bodies. We are neither in favour nor against these associations. Our only aim is to bring in the best and most committed fund managers into the system.”

Sinha also said in the absence of any limit on the number of fund managers, it will only create distortions in fund distribution and investor's benefit.

“Only those fund managers will be allowed who are experienced and who have a stable capital base,” he said.

In the absence of any defined benefit promised to the investor, he said, “The investor should get the best chance of earning his returns. Therefore, they will be allowed to invest their funds abroad. However, this limit or percentage of investment has not been decided yet.”

Speaking on the issue of transaction cost, Ajay Shah, consultant in the department of economic affairs, said, “The transaction cost of switching over from one fund manager to the other or from one scheme to the other will have to be borne by the customer himself.”

This will reflect the genuine cost incurred by any fund manager. “It should be based on competitive pricing and be a prudent decision on behalf of the customer to make efficient choices,” said Shah.